Is Starboard's $9B Offer a Fair Valuation of Kohl's?

In this clip from "Wheeling & Dealing" on Motley Fool Live, recorded on Feb. 4, Motley Fool contributor Toby Bordelon talks about the recent news that Kohl's (KSS -2.45%) has interested potential acquirers and discusses why the retailer might not be too keen on the valuation.

Toby Bordelon: So, Kohl's. You may have heard the news. We all know Kohl's. It's a department store. Probably, they're best known right now as a place where you can, in some cases, drop off your Amazon (AMZN -1.65%) returns. Not a great thing to be known for if you're a chain of department stores, but there you go. They received an unsolicited buyout offer a couple of weeks ago from a hedge fund, Starboard Value (SVAC). The offer was $64 in cash, $9 billion total value, so that was out there. Apparently, people want to buy Kohl's. You can imagine how it might be attractive to private equity. They can probably get some efficiencies here. Maybe do something with an online presence. There are a lot of things that you would think could squeeze some value out.

Jose Najarro: Just to put it in perspective, Kohl's is currently sitting at around $60 [a share] I think.

Bordelon: I think that's right. The stock went up a lot when this news leaked that there was an offer on the table. Management had acted like they're not too keen on this. They've said that they received multiple indications of interest. In fact, the board officially rejected Starboard's offer recently. They said it doesn't reflect the value of the company. None of these little indications of interest or offers we've received reflect the value of the company we think. They went even beyond that. What they did, the board also adopted a poison-pill. The technical name for this is the shareholder rights plan. It kicks in if any investor would acquire 10% or more of a stock. Basically what it does is, it allows for dilution of that 10% holder without diluting anybody else. It makes it extremely expensive for you to take over the company. I haven't looked at the details of this, but most of them contain a provision of assist. The board can waive this for a specific buyer. The idea is, we don't want anyone getting over 10% without our permission. Meaning, no hostile takeovers is what the idea here is. But they also said, hey, we're open to other offers. We're open to any offer. We will review any that come in, but the ones we've got so far, you're undervaluing our company. I don't know. I don't know that $9 billion is a substantial undervaluation of Kohl's in my opinion. Obviously, they're trying to get as much as they can for shareholders. I'm not sure how much more they would be able to suss out beyond that. That's where we stand right now. There's been talk about this for several weeks. I don't know how serious Starboard is. They made an offer today so they were serious. I don't know if they're going to go beyond that and above that. We don't really know anything about these other parties that have indicated interest according to management. On Friday, we got the official news they had formerly rejected that. Today, we're heading into the weekend. Is there going to be some negotiation this weekend with Starboard or with someone else? It's certainly possible. I think we can say for sure that Kohl's is in play to some degree. That's what's going on here. Kohl's is in play. Now, is Amazon a bidder?